* Crop output has been hit by prolonged drought in east
* Agriculture minister says water infrastructure is priority
* But does not give funding details (Adds further comment from minister, graphic link)
By Colin Packham
SYDNEY, Oct 20 (Reuters) - Australia's government is looking at investing in nearly 30 irrigation schemes and reigniting a long-stalled programme of dam building to combat growing water shortages constraining agricultural production.
The country is a leading producer and exporter of crops such as wheat, sugar and cotton, but output faces risks from prolonged drought across much of the Australian east coast.
Australia has previously floated ambitious plans to use dams and irrigation to develop marginal land in the outback, but financial and environmental constraints mean it has not built a major new dam in decades.
According to a government policy paper released on Monday, the amount of water available per capita from dams has fallen more than 20 percent since 1980 and is set to drop further.
Agriculture Minister Barnaby Joyce said investment in water infrastructure must be prioritised, but the paper did not say how the new projects might be funded or give financial detail.
"Effective water infrastructure will be critical to the profitability and productivity of Australian agriculture into the future," Joyce said at the publishing of the government's preliminary agricultural policy paper in Canberra.
Australia is considering some level of investment in 28 potential projects, with six irrigation projects in Tasmania and Victoria seen as the most feasible within the next 12 months.
Longer term, the paper highlighted two potential dams in Queensland, which has suffered the biggest impact from recent dry weather, and sites in Western Australia and Victoria as possibilities, though less advanced than those further south.
"We had a big rise in the building of dams and that slowed because we basically built them in the areas that were feasible and we ran out of places that it was economically and hydrologically sensible to do so," said Dr Joshua Larsen, a hydrology expert at the University of Queensland, adding that some new sites under consideration were previously considered marginal.
When Tony Abbott was elected last year he promised to be the "infrastructure prime minister", but the government has also pledged to control spending as public finances have suffered from a slowdown in the mining sector.
"As a government we will be putting some money on the table, and using that to shore-up some of these (dam) proposals," Joyce told Reuters later on Monday, although he declined to specify how much.
Some of the investment shortfall in agriculture has historically been meet by foreign investment, but ownership of farmland by foreign investors is a sensitive issue in Australia.
An example of a major foreign investment is in the Kimberley area in Western Australia, where a Chinese-owned company has leased nearly 8,000 hectares of land to grow sugar and plans to expand production following the development a dam.
The policy paper proposed greater scrutiny of foreign ownership through a register of land and water assets owned by non-Australian citizens.
Joyce, who was a leading critic of the proposed acquisition of the country's largest listed agribusiness GrainCorp by U.S. grain handler Archer Daniels Midland Co in 2013, defended the tougher scrutiny.
"As a nation, people want the overwhelming majority of farms to be held by Australian farming families, it is what makes us a nation and something that I am very passionate about," he said.
The government also proposed plans to unlock investment from pensions by exchanging money for partial equity in farms.
The focus on water security comes as Australia suffered the hottest year on record in 2013 and there have been forecasts for longer and more intense periods of hot weather.
The government paper also proposed giving farmers grants to help with the cost of expensive insurance protection against the impact of drought.
1 US dollar = 1.1390 Australian dollar Editing by Ed Davies and Joseph Radford